(Adds analyst comment, details; updates stock movement)
June 26 Auxilium Pharmaceuticals Inc
will buy Canadian eye drug maker QLT Inc for
$346 million in the latest pharma deal aimed at cutting tax
Healthcare companies have struck billion-dollar deals to
move their headquarters to lower-tax countries, and the
Auxilium-QLT deal has been structured to base the combined
company in low-tax British Columbia, Canada.
"The transaction is expected to allow Auxilium to reduce its
long-term effective tax rate from the high 30 percent range to
roughly 25 percent, and potentially lower in later years," Aegis
Capital analyst Raghuram Selvaraju wrote in a note.
Valeant Pharmaceuticals International Inc, Canada's
biggest publicly listed drugmaker, has cited the lower tax rate
as a key advantage as it pursues a hostile bid for Botox-maker
Auxilium, which currently focuses on men's health,
orthopedics and dermatology, said the deal would help diversify
into a new treatment area, as well as build up a portfolio of
drugs aimed at rare indications.
Such drugs, called orphan treatments, often command premium
QLT's synthetic retinoid treatment, its lead product,
replaces a key chemical component in the eye that helps in
visual functioning. The drug is being tested to treat eye
diseases caused by gene mutations that hamper the availability
of the component.
Auxilium said it plans to continue to look for potential
partnership agreement for late-stage studies of the drug.
QLT is the takeover vehicle for the deal as Auxilium
shareholders will receive 3.1359 QLT shares for each share held.
Auxilium shareholders will end up owning about 76 percent of
the combined company, which will be led by Auxilium's current
For QLT shareholders, the deal represents a 25 percent
premium based on a calculation of the closing prices of Auxilium
and QLT shares on the Nasdaq on June 25, the companies said.
Auxilium shares were flat at $21.28 in afternoon trade while
QLT's U.S.-listed shares were up 15 percent at $6.21. QLT's
shares were also up 15 percent at C$6.70 on the Toronto Stock
About 32 percent of QLT shareholders have agreed to vote in
favor of the deal, which is expected to close in the fourth
quarter of 2014.
Shares of the combined company are expected to trade on the
Deutsche Bank, Skadden Arps and Morgan Lewis, and Houlihan
Lokey Financial Advisors Inc advised Auxilium, while Credit
Suisse, McCullough O'Connor Irwin LLP, Nutter McClennen & Fish
LLP and KPMG LLP acted as advisers to QLT.
(Reporting by Esha Dey in Bangalore; Editing by Sriraj